Like many other aspects of this recession, the spring real estate market is creating some surprises for the industry. On the one hand, buyers are starting to move off the sidelines, enticed by low mortgage rates and rising home affordability. This nice surprise offers real estate agents an opportunity to move some inventory and create cash flow after a seriously difficult winter market. And while the recent increase in activity is welcome weather, some not-so-nice surprises are springing up with the season. Read more…

A while ago I wrote a short article comparing some of the “standard” real estate marketing tools with those of other industries. I remember commenting how REALTORS, who sell commodities in the hundreds of thousands of dollars range, try to entice buyers with printouts made from an off-the-shelf inkjet printer on recycled paper, while automobile companies readily offer super-glossy-multi-page professional brochures to promote their lowliest of models. Of course, times change: When Baby Boomers invented the real estate industry, printing anything was a mimeographic achievement, so the small office printer was a revolutionary upgrade in marketing in the 1990s. Yet today’s buyers and sellers increasingly come from the Gen X and Gen Y demographics.

Does anyone still think we’re going to re-start the housing market by handing out listing sheets?

Let’s review some basic facts: Last year the average first time buyer was 31 years old, smack-in-the-middle of the Gen X/Y profile. This means many buyers were in their early twenties, while some lagged into old-age-thirties. Even the average seller was only 45 – the tail end of the Boomers, even if they try to pass themselves off as early X’ers. Either way we’re talking consumers who entertain on YouTube, read the news on their iPhones and post video clips to their Facebook page with their eyes closed. Whether it’s a kitchen faucet from Kohler or a new laptop from DELL, the way to attract these consumers is modern multimedia.

Of course, some printed items still work to provide information about products and services. For example, luxury products like the LearJet – comparable in price to some premier homes around the country – feature downloadable PDF spec-sheets complementing their virtual tour and video marketing. not completely unlike a property listing sheet found on some better real estate websites. Still, even LearJet could improve its printed marketing tools compared to a travel site like Abercrombie and Kent, whose Royal Scotsman Train Holiday offers an eight-page brochure online for a $7000-10,000 product. Even an inexpensive piece of software like ACT by Sage offers a multi-page full color product brochure.

The bottom line: One-page property listing sheets are simply pathetic.

To be fair, it’s not just the one page printout that’s awful; it’s the one-page information presentation that most real estate websites provide as well. Whether it’s a jet or a vacation or a software program, all of which have stiff competition in their price range, the marketing tools on their websites offer much more than a single page. Yet most real estate presentations stick to an address, a couple of photos, a few bullet points and a paragraph describing the product. Forget about the huge gap in multimedia – the Learjet site is NASA-like in it’s design while the ACT site offers a full-product video demonstration and a trial mini-site. It seems nearly impossible that real estate would ever reach that level of product marketing, considering the continuing challenge to get agents to put more than a half-dozen photos on every listing. Yet you have to wonder if the real estate industry has some other reason why it continues to propagate the one-page minimalist approach to marketing its products.

Oh, right: They want to force the customer to call.

Does providing less information lead customers to call, email or otherwise contact the “broker” of a product? Possibly. But has anyone ever wondered how many people simply don’t reach out at all, when so little marketing information is presented? Why do so many buyers who visit an open house fail to call for a second appointment? Was it because they didn’t like the house the first time – or that the listing sheet was such a poor “sales support piece” that it failed to inspire them to consider a second look? What percentage of online leads never inquire on a listing – or at best, delay that inquiry because the presentation of home information is flat, one-dimensional, and mostly organized like an IRS form?

Could the listing sheet actually be harming sales?

Any of this could be possible. But perhaps it’s not even that complicated. Maybe it’s just another example of how the Gen X / Gen Y consumer has moved far beyond the Baby Boomer modality of the real estate sales industry (I almost typed “stales” industry – what an interesting slip that would have been…) Listing sheets aren’t just a bad marketing piece; they are a bad marketing mentality. They reduce homes to uniform, tabular experiences that mostly fail to excite, entice or even adequately inform the potential buyer. The “just the facts” approach to room sizes, amenities and taxes smothers emotional excitement about buying a home.  Everything about the listing sheet presentation is dull, rough, plain-paper-bag.

Where are the download-ready multi-page flyers, with edge-to-edge high quality photography? Who is handing out CD’s or flash drives at open houses with dozens of photos, documents and videos to help the buyer learn as much as possible? Have you ever seen an agent offer to SMS a video clip from their smartphone to the buyer’s smartphone after touring a home? I’m guessing these aren’t the ordinary experiences that real estate agents are offering to their customers today.

Think about a great product experience. Perhaps it’s the thrill of flying on a private jet. The luxurious feeling of a train ride through the Scottish Highlands. The creativity of a powerful, intuitive piece of software. There’s no way those emotional responses can be conveyed on a single web page or printout. Complex sales take complex marketing tools. Capturing the value proposition of these products simply can’t be done in a sanitized one-page format.

Real estate is perhaps one of the most complex transactions – emotionally, financially, intellectually. Trying to excite buyers by handing them a single piece of paper seems – well – just a little pathetic.

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Recently I participated on a panel where the audience could ask literally anything. After a few softball questions to get started, the pink elephant entered the room: What do you think the real estate brokerage company of the future will look like? The room was suddenly still. Everyone leaned forward in their seats. All eyes were on the panelists. And after three other great answers – about companies focused on leadership, treating customers like guests, and practicing the fine art of salesmanship – the microphone came to me. What would be my answer? What will the real estate brokerage of the future look like. No talk about virtual offices and wireless tools. Forget social networking online. Those aren’t models – but tools. Think evolution. So I gave the answer nobody wanted to hear: We already have the future brokerage model, in most companies, today. We just have to be willing to look.

The real estate brokerage model of the future will be a team.

At Matthew Ferrara & Company, we believe the real estate industry is passing through its industrial revolution. A slow, steady, and painful transformation is occurring, moving the industry from a semi-feudal organizational model into a renaissance of modern production methods. The existing business model was created by Baby Boomers, for Baby Boomers, based upon 19th century apprenticeship shops. A loophole in the tax code let Boomers create and sustain non-modern artisan workshops where salespeople remained independent and left to learn their trade from experienced elders. While costs remained low and operations required mostly manual labor, this Old World model worked.

Today, real estate requires knowledge workers, not manual labor. As a result, the future brokerage model must be organized around the knowledge team.

The old model of cheap labor was, essentially, a ponzi-scheme. Everyone had an Aunt Sally who would move someday. A large network of nieces and nephews offered brokers a baseline of social network deals every year. A high attrition rate of non-productive salespeople meant that recruiting – a cheap effort – ensured a fresh flow of nieces and nephews. It worked well, as long as overhead remained low, technology was minimal and sales were confined to the local area of relatives.

Developing the sales forces required apprenticeship, like craftsmen from days gone by. New agents learned by watching and copying experienced agents, ensuring both good and bad habits were passed on. Tradition became ingrained. Managers (often past-agents of varying success) reinforced “how it is done in our office.” Competition became a game of one-up-manship. Whichever company had the shiny-new-thing was thought to be better than others. Since most companies were in the same guild, locally and nationally, all regurgitated basics were codified as “standards.” It was traditionalist and copy-cat, with no penalty for failure. Mostly, agents were left to figure it out on their own. Most never did, which is why we have E&O insurance.

Along the way, the industry languished. Profits depended mostly upon “booms” while busts simply cleared out the tired and weary. Brokers risked fortunes on a model where “hoping” was the dominant management theory. Performance was measured by luck, timing, and the shiny-bullet-of-the-day.  Sales fell out of fashion, becoming passive-aggressive postcard canvassing done by “counselors.” Technology was resisted, even when it promised new markets and lower costs. When the most common question from brokers was how to get their agents to attend office meetings, greater dysfunctional problems surely lurked below the surface.

Consumers suffered too. Service was a hit-or-miss, based upon which agent happened to be on floor duty that day. Branches within the same company operated differently. Quality controls were sporadic. As whims and talents varied from workshop to workshop, performance was thought to be based upon superstars, not everyday agents. Yet somewhere within this hodgepodge, a small group of agents discovered how to overcome the chaos around them. They built organizations-within-organizations to do what was necessary to create consistently productive outcomes.

They created teams.

Agent teams divided up the labor amongst a group of specialists. The division of labor is the organizational breakthrough that created the modern world. Most people remember Taylorism as the thinker who studied factory assembly lines. Subdividing work into smaller parts and assigning experts to each stage lets productivity soar. The division of labor isn’t just a time-saving model for manufacturing: It’s a talent maximization model for service organizations like real estate companies.

Real estate teams are amongst the most highly productive entities in the industry today. Each team member person does only that which they have been fully trained to do. And they do it consistently well. Personal talents, now intellectual not physical, are applied systematically. A team’s division of labor positions the right person doing the right job to fulfill customer’s desires.

Output soars. So do profits. As does customer satisfaction.

That’s the model of the future. Organizing brokerages into performance teams that permit each person to focus on their best efforts every day. The proof of concept has already been completed: Most brokerages’ highest source of revenue comes from their in-house agent teams. (If they make little or no profit from team revenue is an entirely different problem.) The very existence of teams proves that the model of independent agents floating aimlessly is disliked by career-minded salespeople.

Outside of real estate, the team model is the norm. Think of high performance organizations – doctors in an operating room, attorneys at a law firm, race car pit teams. Everywhere high performance is needed, a team is involved. Motivated, integrated, seamless, able to create great outcomes over and over again. Teams make profits, turn clients into raving fans, and create careers for team members. Each team has a leader, surrounded by support experts, but only together can they reach their goals: A successful surgery for the patient, a win in the courtroom, a victory lap on the race track. Helping buyers and sellers of a home.

The future model has been right in front of us all along. Today’s teams have mastered the performance and profit formula. Teams leaders are specialists, surrounded by support experts. Team members are paid according to their individual contributions to the goal. Teams expand by adding specialists – a buyer’s agent, a relocation expert – supported by the same team of experts. One nurse supports multiple doctors; one paralegal supports multiple lawyers. The growth of the company is always at the specialist end, not the support staff end. Which is totally different than today’s model, which confuses supporters for salespeople.

The real estate industry needs to focus on its organizational theory. The self-serving mantra being repeated today – that once the market comes back, everything will be fine – is not only incorrect, but traditionalist nonsense. Companies waiting to go back will become extinct. Like steamships in the age of spaceships. The old ways  didn’t perform very well, without a false-economic boom.

The only solution is to leave behind the cottage-industry mentality and implement the division-of-labor models of the modern economy. Teams already outperform other models, by targeting the expertise of their knowledge workers, supported by technical experts, technology and management. That’s what teams can today. If brokers are smart, they’ll stop trying to return to the wheel. Just copy the team model – on a grander scale – and prepare to go where nobody has gone before.

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